The Blotter Report: Eating the Paper Trail

Apr 02, 2014

Would-be fraudsters beware: Eating the evidence will not deter the Securities and Exchange Commission. A Morgan Stanley stockbroker and an employee at a prominent New York law firm found that out the hard way when the two were charged with insider trading last month.

Simpson Thacher & Bartlett clerk Steven Metro allegedly passed tips about more than a dozen pending mergers involving the law firm’s clients through a middleman to broker Vladimir Eydelman.

To avoid leaving a paper trail, Metro’s middleman (who was not named in the case) would chew up and even swallow Post-it notes and napkins Metro used to write out the names of the stocks after Eydelman memorized them, according to the complaint.

After receiving a tip, Eydelman would go back to the office and gather research about the target company to throw off suspicion. He eventually emailed the research to the middleman along with his purported thoughts about why buying the stockmade sense.

The scheme—which netted $5.6 million in illegal profits—was uncovered in a joint investigation by the SEC and the U.S. Attorney’s office.

A spokesman for Morgan Stanley said Eydelman has been on administrative leave and the firm is cooperating with authorities. No word on whether Metro still has
a job at Simpson Thacher.